13 hrs ago
Rupee Opens Lower as Fed Hike Strengthens Dollar
India’s rupee became slightly weaker against the US dollar.
This happened after the US Federal Reserve raised interest rates.
The Fed also suggested that it might raise rates again this year.
Higher US rates can make dollar investments more attractive.
This may encourage investors to move money away from countries such as India.
High oil prices are another concern because India imports oil.
The Reserve Bank of India plans to remove some extra money from the banking system, which could support the rupee.
Experts say the rupee’s next move will depend on interest rates, oil prices, investor activity and central-bank action.
The rupee opened three paise lower at 96 against the US dollar on Thursday, 17 September.
The US Federal Reserve raised its policy rate by 25 basis points to 3.75%-4%, its first hike since 2023.
The dollar index rose above 100, while Asian currencies weakened and regional equities traded mixed.
Foreign portfolio investors withdrew about ₹29,679 crore from Indian equities during the first half of September.
High crude prices, possible US tariffs and global rate pressures could weigh on the rupee, while RBI liquidity measures may offer some support.
- Who
- The Indian rupee, the US Federal Reserve, foreign portfolio investors and the Reserve Bank of India are central to the report.
- What
- The rupee opened three paise lower at 96 per US dollar after the Federal Reserve raised interest rates and signalled another possible hike.
- Where
- In India’s currency market, amid movements in global financial and commodity markets.
- When
- Thursday, 17 September, following the Federal Reserve’s decision on Wednesday.
- Why
- A stronger dollar, higher US yields, foreign portfolio outflows and crude oil prices increased pressure on the rupee.
Domestic Support Measures
Global Downward Pressures
Role of the Reserve Bank of India
Domestic Support Measures
The Reserve Bank of India’s liquidity absorption and possible currency-market intervention could provide some support to the rupee.
Global Downward Pressures
Experts say RBI measures may not fully offset pressure from a stronger dollar, higher US yields and elevated crude prices.
Near-term rupee direction
Domestic Support Measures
Reducing surplus rupee liquidity through the planned bond sale could help support the currency.
Global Downward Pressures
Market experts say the rupee could remain under pressure if the dollar strengthens, foreign outflows continue and crude stays above $100 a barrel.
Impact of possible US tariffs
Domestic Support Measures
The effect on India would depend on the final legislation and how it is implemented.
Global Downward Pressures
Proposed tariffs of up to 100% on countries buying Russian oil and gas could disrupt trade flows and add uncertainty for the rupee.
Key facts
- Opening exchange rate
- ₹96 per US dollar
- Opening move
- Three paise lower
- Federal Reserve rate increase
- 25 basis points
- New US policy-rate range
- 3.75%-4%
- Foreign portfolio outflows
- About ₹29,679 crore from Indian equities in the first half of September
- Planned RBI bond-sale operation
- ₹50,000 crore first tranche within a planned ₹1 lakh crore open-market bond sale
- Near-term analyst projection
- A sustained move above 96.00 could take USD/INR toward 96.30-96.50, according to Amit Pabari
Quotes
Amit Pabari
Managing director of the research team at CR Forex Advisors
“With the dollar strengthening, US rates moving higher and crude oil remaining above $100, the chances of USD/INR breaking above 96.00 have increased.”
livemint.com
Sources
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